How to price your home in 2015

In case you haven’t been following along closely, the March 3^rd release of CoreLogic’s Home Price Index (corelogic.com) indicated that nationwide home prices increased 5.7% during January compared to the same period last year; and there was a 1.1% increase during January compared to December. And believe it or not, CoreLogic stated that nationwide home prices including distressed sales are only 12.7% below the peak; and only 8.6% below peak if you exclude distressed sales.

Of course, national home price data are an average of regions that vary economically, reflected in their respective housing market. CoreLogic Chief Economist Dr. Frank Nothaft stated, “House price appreciation has generally been stronger in the western half of the nation and weakest in the mid-Atlantic and northeast states…In part, these trends reflect the strength of regional economies. Colorado and Texas have had stronger job creation and have seen 8 to 9 percent price gains over the past 12 months in our combined indexes. In contrast, values were flat or down in Connecticut, Delaware and Maryland in our overall index, including distressed sales.” The only 2 states that realized negative price appreciation year over year (including distressed sales) during January were Maryland and Connecticut, where home prices appreciated (–0.3%) and (-0.6%) respectively.

If you include distressed sales, Maryland’s January home prices appreciated (–0.3%) year over year, (-0.1%) month over month, and is (-25.3%) from the peak. Regional differences, of course, exist: DC home prices including distressed sales appreciated 3.3.% year over year, (-0.4%) month over month, and is only (-1.4%) from the peak; Virginia home prices appreciated 1.4% year over year, (-0.2%) month over month, and is (-15.6%) from the peak.

The CoreLogic HPI Forecast projects nationwide home prices, including distressed sales, to appreciate 0.4% from January to February, with an annual appreciation of 5.3%.

CoreLogic expects consistent home price appreciation through 2015 and into 2016, due in part to a current shortage in housing inventory. Anand Nallathambi, president and CEO of CoreLogic, stated that “Many homeowners have taken advantage of low rates to refinance their homes, and until we see sustained increases in income levels and employment they could be hunkered down so supplies may remain tight. Demand has picked up as low mortgage rates and the cut in the FHA annual insurance premium reduce monthly payments for prospective homebuyers.”

According to the Greater Capital Area Association of Realtors® (gcaar.com) January Montgomery County single family home statistics, home inventory and home buyer activity increased compared to last January. Although total housing inventory increased 26.5% year over year, contracts (pending sales) increased 16.6%, and settlements (sales) increased 4.8%.

If you’re wondering how these statistics might affect your sale, you’re not alone; many home sellers are trying to shape a sensible marketing plan this spring, which includes deciding on a listing price. Consider that although listing inventory is currently relatively low, it is likely to spike within the next two months adding competition to a market competing for discerning home buyers.

Typical home buyers have been increasingly demanding value; besides looking for a “turnkey” (updated and ready to move in) home, they have also been sensitive to home prices. Since cash buyers are not as prevalent as they were two years ago, and many buyers are concerned about their monthly obligations and budgets; pricing your home correctly will be more important this year than it has in the past.

By Dan Krell
© 2015

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

May 1, 2013June 29, 2019

Hybrid housing market not for the squeamish

A “hybrid” housing market is has a little bit of everything. There are the multiple offers and escalation clauses, as well as the homes that sit idle for days (both could be on the very same block!); buyers willing to pay more than list and those offering less. The result is frustration among buyers and sellers who are disappointed by not having their expectations met; and even a few real estate agents are losing their cool. What is becoming increasingly apparent is that the current housing market is not for the squeamish!

Although few home owners are venturing to list their homes, those who do may be seeking a premium price; most likely due to the optimism permeating the air. Furthermore some are expecting the prize of getting multiple offers with escalation clauses. Owners of homes that do not sell within the first week of listing are anxiously wondering, “Why hasn’t my house sold yet?”

The flip side is that although home buyers are plentiful (compared to the current home inventory), there still seems to be many home buyers who seek to buy a home at a 5%+ discount. Unlike the “bargain hunter,” many of these home buyers are more concerned with future home resale (which may be indicative of a lack of confidence in the future housing market).

Pressure on home buyers and sellers is likely originating from reports of bubble activity pockets that seems to be popping up, and recent home price indices that indicate increasing national average home prices. Regardless, there appears to be a lack of symmetry among home sales as well as a lack of consistency among home buyers and sellers.

So if you’re planning a home sale or purchase, what are you to make of this? You should understand that national home price indices are comprised of multiple regions, and much of the national home price increase is due to regions that had the highest home price declines over the last six years, as well as a few pockets of very hot activity (unlike the home price climb during 2004-2006, which was mostly due to high confidence in the housing market, easy credit, and a much different economy). Likewise, the Metro DC region is microcosm of the national picture, such that it is comprised of a number of counties that realized double digit home price decreases, as well as a few pockets of hot activity.

To add some perspective to local market trends, the average days-on-market of a home in Montgomery County is roughly 60 days (depending on the source). Additionally, Montgomery County single family home data compiled by the Greater Capital Area Association of Realtors® (gcaar.com) indicated that median and average single family home price decreased year over year for the last three consecutive months. And while the number of homes listed continues to decline, the number of pending home sales (homes under contract) has also declined in March year over year, as well as year to date.

Getting into the market requires solid data, a strategy, and an open mind. If you’re selling: consult with your agent about recent neighborhood prices; and stay informed of all activity, as it could be your cue to decisions made on the sale. If you’re buying: in addition to discussing comp data, you should consult with your agent about a strategy to deal with competition from other home buyers.

By Copyright
© 2013

This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws.

February 13, 2013December 2, 2020

Predicting 2013 home sales through housing statistics

by Dan Krell
DanKrell.com
© 2013

Much like a soap opera cliff hanger, 2012 home sales ended on an upward swing leaving people wanting more good news. There’s a lot expected from this year’s real estate market, so what are some of the experts saying about 2013?

The latest S&P/Case-Shiller Home Price Indices (www.standardandpoors.com/indices) press release dated January 29th reported home prices rose during 2012 through November rose in 19 of 20 cities. The 10-city composite revealed an annual home price increase of 4.5% and the 20-city composite revealed a home price increase of 5.5%. And although the release described that the seasonally adjusted home prices may be an indication of a week winter housing market, there was a clear pronouncement that “…housing is clearly recovering…” and pointed out that nationwide existing home sale volume outpaced recent years’ volumes. The cities that made the most gains were the cities that experienced the most declines in home values and the highest foreclosure rates. The home price indices of the 10-city and 20-city composites are reportedly back to 2003 levels.

The National Association of Realtors® (realtor.org) reported in a February 11th press release that the national median existing single family home price increased 10% in the fourth quarter 2012 over the same period in 2011. And the Housing Affordability Index indicates that the homebuyer’s buying power is at a point where they could “comfortably” afford to purchase a home.

Fourth quarter 2012 home sales volume was reported by NAR to be the highest since the fourth quarter 2009; 23% of home sales during the quarter were from distressed home sales (short sales and foreclosures). Additionally, home sale inventory was down about 21.6% for the quarter, which is the lowest since 2001.

NAR chief economist Lawrence Yun was reported as saying that home sales are being energized by “pent up demand” and low inventories. He stated, “…all the conditions for strong price growth are at play.”… “Home sales are on a sustained uptrend, mortgage interest rates are hovering near record lows and unsold inventory is at the lowest level in 12 years…” Yun believes that “…supply and demand dynamics are very much at play.”

Given recent reports from various sources, it looks as if there is momentum in the real estate market. And NAR’s Dr. Yun lays out an argument for home sales that hasn’t been since 2006. But chances are that 2013 home sales will be about many factors, not just “pent up demand” or “supply and demand.” For example, it is doubtful that hedge funds will continue the bulk foreclosure buying that pushed home sales figures to almost record levels.

By themselves, housing indices are broad based measures that typically measure one aspect of the housing market; describing the variables responsible for the measures and indices is more difficult and usually a guess at what’s happening in the marketplace. In an effort to provide a more meaningful measure of the housing market, I devised a measure called the “Krell List-to-Sold Ratio;” which is the ratio of total number of listings to the total number of homes sold in any given area during any time period. The January 2013 Krell List-to-Sold Ratio for Montgomery County reveals that activity continues to be elevated; which is interpreted to mean that the year has started stronger than recent years, but not as strong as 2012.

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This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws. Copyright © 2012 Dan Krell.

May 31, 2012

Skepticism increases 1.3% on conflicting housing data

by Dan Krell © 2012
DanKrell.com

When the National Association of Realtors® announced last week that April’s existing home sales increased 3.4% to an annually adjusted rate of 4.62 million compared to a downwardly revised 4.47 million in March (http://www.realtor.org/news-releases/2012/05/april-existing-home-sales-up-prices-rise-again), I have to admit I was a bit skeptical. The local market is not exactly humming along, so as I read in the above referenced NAR release that April’s existing home sales rose 10% over the figure from April 2011, I thought some perspective is needed.

Let me quote you some housing statistics. The number of Montgomery County single family homes that sold increased 5.1% in February, 14.7% in March, 33.9% in April and 27.9% in May (MRIS data reported by the Greater Capital Area Association of Realtors®; gcaar.com). These numbers are not from 2012; but rather, these are the local stats from 2010 compared to closings from 2009. Yes, as you remember – 2010 was a spectacular year for local real estate!

Sarcasm aside, the number of Montgomery County single family home closings increased 5.8% during April 2012 (compared to 2011); and the number of Montgomery County condo closings also increased 8.1% during the same time. But, Montgomery County year-to-date settlements are still below the number of settlements that occurred during the same time in 2011 (-1.4% for single family homes; and -2.8% for condos). Although the 690 single family home settlements that occurred in April 2012 is higher than 652 that occurred in April 2011, the 2,034 single family home settlements that occurred year-to-date through April 2012 is lower than the 2,062 settlements that occurred the same period in 2011. Regardless, the number of settlements is far lower than what we have seen in past “normal” markets (for example, GCAAR reported that there were 849 settlements of Montgomery County single family homes in April 2001).

It must be noted that although the first half of 2010 seemed to be on a role, the number of 2010 Montgomery County single family home closings actually ended the year slightly lower than 2009. So, even though we have a month of some positive news, let’s be cautious about making assumptions.

Ok, I know you’re going to ask about NAR’s statements about rising home sales. Sure, NAR chief economist, Lawrence Yun, was reported to say that “the housing recovery was underway.” He was also quoted to say, “A return of normal home buying for occupancy is helping home sales across all price points, and now the recovery appears to be extending to home prices…”

However, the latest release of the S&P/Case-Shiller Home Price Indices (May 29th; standardandpoors.com) states “that all three headline composites ended the first quarter of 2012 at new post-crisis lows.” Although there was a 1.6% decrease in home prices in the Washington DC metropolitan area in February compared to January, there was a 1% increase in March compared to February; however, prices have decreased 0.6% for the year.

Although media headlines shout that housing has turned a corner, it’s a little premature to assume that the housing market has normalized with only one month’s data. The housing market has turned so many corners in recent years that I think we’ve made several circles! Just as in 2010, let’s see the final tally. There’s still some data to collect; let’s see how the housing market fares through the remainder of the summer.

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This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of May 28, 2012. Using this article without permission is a violation of copyright laws. Copyright © 2012 Dan Krell.

December 15, 2011November 11, 2012

Post-crisis real estate: What’s in store for the housing market?

by Dan Krell
© 2011
DanKrell.com

It is often said that history repeats itself. If we want a glimpse of our future, we should look to the past; if we want to see how a post-crisis housing market looks like, we should look to see how a previous housing crisis ended.

According to the Census Bureau (census.gov), the last time homeownership rates declined was 1980-1990. Recent seasonally adjusted homeownership rates have been declining slowly from the all time high of 69.2% reached in the first quarter of 2005. The current seasonally adjusted homeownership rate (for the third quarter of 2011) is 66.1%, which is similar to the homeownership rate of 66.2% reported by the 2000 Census.

Although the country is dealing with some of the same economic issues that was problematic during the early 1980’s; the current real estate market is more akin to like the post S&L crisis of the late 1980’s and early 1990’s, when the market was flooded with foreclosures and a coinciding recession impeded an already difficult housing market. Some may remember that during that time home prices decreased and, not unlike recent events, many home owners walked away from their homes (some lenders were sent the keys of recently purchased homes).

Then like today, resulting legislation changed the lending landscape in an effort to ensure such systemic abuse and failure would not happen again. The Census reported that the homeownership rate in 1990 was 64.2%, just shy of the 64.4% homeownership rate reported in 1980.

Additionally, mortgage interest rates were “normalized” post the S&L crisis, making homeownership more affordable than the previous decade. Then, like today, low mortgage rates are touted to make owning a home more attractive than renting.

Also, like that time, the real estate business was changing. Besides changing business models (buyer agency was becoming recognized across the country), large real estate brokers downsized and/or absorbed brokers wanting to get out of the business. Today’s real estate business models have changed to accommodate technology and a vast array of information; additionally, national and regional brokers may begin to see their market share change with the marketplace.

Demographics are always changing. Current demographics indicate a shrinking pool of willing home buyers and sellers. As home prices have dropped over the last several years, many baby boomers who planned to downsize cannot afford to sell their home; additionally, “move-up” home buyers have also decided to make do with their current home longer than they planned as they find that their home’s equity has diminished. Many renters are choosing to continue renting as homeownership is viewed as an anchor; they prefer to be more mobile and not tied down by homeownership until they become more established in their careers.

Before home prices can stabilize, many expect average home prices to drop another 20%. Home prices have (more or less) historically returned to an established “norm” after a housing boom. Home prices are about 26% higher than the “norm” adjusted price, which was established in 1890 as reported by Robert Shiller (Irrational Exuberance; Broadway Books 2nd edition, 2005).

As we move forward, economic and industry related barriers continue to prevent a recovery in the real estate sector. It may be several years before these issues may be managed; however once addressed, confidence in homeownership may begin to increase once again instilling pride and sense of community.

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This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of December 12, 2011. Using this article without permission is a violation of copyright laws. Copyright © 2011 Dan Krell.

by Dan Krell DanKrell.com © 2013

Much like a soap opera cliff hanger, 2012 home sales ended on an upward swing leaving people wanting more good news. There’s a lot expected from this year’s real estate market, so what are some of the experts saying about 2013?

by Dan Krell
DanKrell.com
© 2013